Destinations establish way of measuring ROI of social media

Destinations are some of the most prolific users of social media in the travel industry – a trend that includes a wide cross section of channels and often backed by hefty levels of marketing spend.

In fact, it is unusual to find a tourism board or Destination Marketing Organisation (DMO) that isn’t regularly throwing out all sorts of content on YouTube, Facebook, Twitter, Instagram et al.

But how does an organisation establish if its efforts with social media are worth all the messages on Twitter, pictures on Instagram, videos on YouTube and interacting on Facebook?

In other words: what’s the return on investment for all that hard work?

Think, a social media agency that works with tourism boards and DMOs around the world, has developed what it claims is a measurement standard for organisations to use when they want to evaluate the success (or not) of a social media campaign.

Organisations that have collaborated on the project include Destination British Columbia, Illinois Office of Tourism, Innovation Norway, Tourism and Events Queensland, VisitEngland and Visit Flanders.

Think says DMOs typically use surveys to try and get some feedback from their respective followers or fans on Twitter and Facebook, but these are limited, for obvious reasons.

Tourism Ireland, it notes, created the Social Ad Value Equivalency (SAVE) metric a few years ago, but this only calculates the earned media value of social media activities, rather then establish the anything beyond the efficiency of a campaign.

So, Think decided to try and generate its own formula, known as Potential On Investment.

How does it do this? In its simplest form, DMOs work from three elements:

Total expenditure of a visitor

Multiply it by a percentage that represents a social media channel’s influence on purchasing

Combine with consumer interactions across a channel

Using data on social media impact from a Phocuswright report (Destination Unknown), Think has worked out how influential specific channels can be on purchasing behaviour.

Destination X has established that the average consumer spends Euro 2,000 on a visit.

Across its social media channels, each has the following combination of hits, likes, interactions, etc:

Facebook – 10,000

Instagram – 2,000

Twitter – 2,200

Pinterest – 500

YouTube – 1,200

Therefore, the DMO’s Potential On Investment would be as follows:

To move it along even further, Think says the DMO can then establishing its Return On Investment by calculating the cost of social media divided by the POI figure.

It says:

“If the DMO invested Euro 50,000 in social media in order to arrive at the POI, the ROI calculation becomes Euro 1,143,020 divided by Euro 50,000 = 22.86.

“The ROI of social media for this DMO is therefore 22.86 to 1 (reminder: this is still based on potential revenue).”

Think concedes that there are various elements of the formula that need to be tightened up, such as relying on third party data such as the Phocuswright channel effectiveness figures.

The company also argues that the model should not be used to dictate “operation decision-making”, such as going on Facebook link-baiting drives that actually have little or no impact on promoting tourism.

CEO Rodney Payne says:

“This model provides a starting point for understanding the financial value that social media can provide for a DMO. The formula is easy to use and apply, and it does not require additional research.

“As with any other measurement formula, the POI methodology is not perfect and contains aspects that can and will be debated.”

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Karl

Let’s just call it what it is. It’s a b2b lead generation play. Why do you think you need to send your email to download the full paper. I guarantee whoever downloads the paper will get a sales call.

Therefore should any DMO take this seriously? I think they would look at it with a critical eye and not blindly follow advice from agencies, who are looking for clients. And who’s to blame them it’s their job.

Bold statements like this will be criticized and if there is no concrete methodology to back it then it’s just fluff.

Ben

I agree with Niall if destination brands really want to calculate the ROI of their social media investments, then they need to develop their own models based on their own objectives and research. There is not one ROI model that fits to all the different destinations. It’s a great way to receive PR for creating this formula but in reality this doesn’t contribute to the industry. Most of the research departments of DMO’s are already doing research among media influence, campaign and among their visitors, social media is a part of this. Promotion or Marketing of a destination can never be measured in real dollars. So why should Social Media? This formula makes no sense at all.

Thanks for the discussion everyone. We will address some of the specifics on our blog over the next few weeks. What I’m looking forward to is to hear from DMOs around the world what their results are and how it addresses the principle need to have a standard for reporting. So please keep an eye out and continue the discussion. Because that’s what we need to collectively move this forward because it’s important for DMOs to be able to have this standard.

The underlying principle of using the value of a consumer’s economic impact as a starting point to determine the impact of a DMOs communication, in combination with measuring demand is crucial. Because thats the value that matters to a DMO. And that’s what makes this exciting for them.

First things first, in relation to William’s comment, a “good starting point” is hardly a “standard”. Just saying.

Secondly, this is not a “way of measuring ROI of social media” as the headline suggests. It’s a calculation for estimating the potential contribution, based on the very flaky assumption that every interaction with a destination’s social media accounts somehow makes that person more likely to visit the destination in question, and then spend a certain amount of money there. Let’s delve into those three factors a little deeper:

1. Value per visit. The average spend per visit to London in 2014 was £636, well short of the €2,000 in the example.
2. Channel impact. I’m not going to pay $1,000 for the Phocuswright report, but I’d be willing to guess that their figures are not based on the number of interactions with a destination’s social media accounts, but the number of people saying that a particular channel influenced their decision. To using the latter to imply the former is simply wrong.
3. Interactions. Does every interaction, whether unique or not, increase the likelihood that someone will visit a destination by the same factor? In the case of negative interactions (complaints, etc.) the reverse could even be true.

Thirdly, the ROI calculation is wrong (even if you believe it). You need to deduct the cost of investment from the gain to determine the net return, then divide this figure by the investment. I’d be wary of anyone claiming to have a model for understanding the financial value of social media who can’t even get this right.

If destination brands really want to calculate the ROI of their social media investments, then they need to develop their own models based on their own objectives and research, and stop looking for silver bullets that simply don’t exist.

Lisa

I agree with Tom. This number can easily be manipulated to show positive results. I can understand why Destination Think came up with this formula. It helps satisfies their clients needs and makes for a great headline. I do commend the effort but this is just too complex of a calculation to try and solve.

Tom

Nobody who really wants to get to the bottom of the impact of social media advertising can possibly take THIS seriously! For starters, the average spend of a consumer at 2,000€ is absurdly high! It will almost certainly consider transport costs that the destination won’t get anything out of. To further complicate: is a destination the country a visitor goes to, or a city? (So say someone visits Germany for 2 weeks and spends 4 days of this time in Berlin – what counts as the destination here? Berlin? Germany? Can one assume the visitor spend 2,000€ in both Germany and Berlin?) Then: how can this formula work without considering the average length of stay in a destination?

There are further things to say about this formula. Where does the 4.51% figure for Facebook come from? Is that 4.51% of people who said that they bought something because they saw it on Facebook? And if so, was Facebook the ONLY channel that influenced them? I am sceptical.

Excuse me but: I can see all the marketers in DMOs’ social media teams work hard to make this formula work for them to justify getting more money from their funders but anyone with a bit of grasp of statistics, maths, market research (and common sense) knows that this is a pretty awful sausage machine. There’s no easy answer to this but proper market research (despite the quoted “obvious reasons”) that involves asking people is a better way to work out the ROI of social media.

William Bakker

The €2000 is merely an example. It’s an input value that’s different for every DMO. Most DMOs know this number by market. So it will change on a case by case basis.

The channel impact value is calculated based on consumer research and will vary by market as usage and impact of social channels vary. These numbers are for the US market.

I think we have recognized that this is not an exact science. It always will be. Just like AVE or any other standard that measures PR out there. But it’s a good starting point based on the best available research. By having a standard we have at least a consistent method to measure the impact over time.